Medical Developments International Limited

MVP Details

Substantial Shareholder Declared: Medical Developments International Limited (ASX: MVP) manufactures and distributes respiratory and emergency pain relief products (such as Penthrox®), veterinary equipment and a pharmaceutical drug. On 19 July 2021, MVP reported that FIL Limited had become a substantial shareholder of the company, with 5.74% voting rights in the firm.

Issue of Shares: On 9 July 2021, MVP issued 23,275 shares at $4.57 per share to fund the expenses for the CSIRO Manufacturing Technologies project. The options will expire on 9 July 2023.

FY21 Business Highlights: On 16 July 2021, MVP notified that its ongoing business review is primarily complete and released the following strategic updates: 

• Non-Cash Charge: MVP estimates $7.5-$8.5 million of a non-cash charge (after-tax) for the FY21 accounts ending on 30 June 2021.
• Impact on Respiratory Segment: The respiratory business wing has been adversely affected by the COVID-19 impact in FY21, leading to impairment of related intangible assets and a tepid outlook.
• Growth Outlook: MVP is optimistic about the long-term prospects of its Flow technology. The firm has a market reach strategy for expanding Penthrox® product sales in Europe and implementing supportive structural changes for growth. The business review strongly supports the carrying value of Penthrox® associated assets. MVP will continue to explore licensing and other opportunities for the technology.

1HFY21 Key Takeaways:

• A Rise in Gross Revenue: MVP posted a growth of 14% YoY in gross revenue to $12.8 million in 1HFY21.
• Increase in Net Loss: MVP reported $1.15 million of net loss after tax for 1HFY21 versus profit after tax of $0.25 million in 1HFY20.

Revenue & Net Loss After Tax from 1HFY21-1HFY20; (Analysis by Kalkine Group)

Key Risks:

• COVID-19 Impact: MVP witnessed the business impact of COVID-19 in 1HFY21 with a reduced number of trauma events and ambulance movements, subdued sales of Penthrox® in significant markets.
• Regulatory Delays: The company faces regulatory delays for new product launches and marketing authorisations for expanding in new markets.

Outlook:

• MVP expects a more robust sales performance in 2HFY21, cautiously factoring in the impact of reclaimed European marketing authorisations, newly inked agreements, key account managers recruited in Belgium and France, and field personnel in Australia.
• Based on the initial unaudited accounts of FY21, MVP estimates $4.2 - $5.2 million (pre impairment) of Net Loss After Tax for the year ended 30 June 2021. The company will release FY21 results on 25 August 2021.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of MVP gave a positive return of 3.47% in the past week and a negative return of 25.13% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $3.680 - $7.290. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some discount than its peer average, considering an expected non-cash charge and net loss after tax before impairment for FY21, the ongoing impact of COVID-19 on the respiratory business, etc. For this purpose, we have taken peers like Starpharma Holdings Limited (ASX: SPL), Medlab Clinical Limited (ASX: MDC), CSL Limited (ASX: CSL) and others. Considering the low trading levels, growth prospects for the Flow technology, market approvals for expanding Penthrox® sales in Europe, near-completion of business review, valuation, and associated risks of COVID-19 on the respiratory business, we give a ‘Speculative Buy’ rating on the stock at the market price of $4.170, as on 9 August 2021, 10:42 AM, (GMT+10), Sydney, Eastern Australia.

MVP Daily Technical Chart, Data Source: REFINITIV 

Dacian Gold Limited

DCN Details

Redcliffe Gold Project Update: Dacian Gold Limited (ASX: DCN) is engaged in exploration, mining, and production of gold. DCN primarily focuses on the Mount Morgans gold project near Laverton, Western Australia. On 21 July 2021, DCN updated on the Redcliffe gold project, and the Mineral Resource estimated for the Hub deposit.

• DCN reported 139,000 ounces of total Mineral Resources estimated and 80,000 ounces of Indicated Mineral resources at the Hub deposit.
• The drilling for the Resource definition affirmed the high-grade gold mineralisation intersection at the Hub deposit.
• The drilling has contributed to enhanced geological understanding of the Hub deposit. The company plans to include the new results in the Laverton operations (to be started for a life-of-mine plan update).
• The Mineral Resource estimation is nearing completion for additional Redcliffe deposits such as Nambi, Kelly, Redcliffe, GTS, and others.

Business Highlights of Q4FY21:

• Increase in Production: DCN reported 25,558oz of gold production in the June 2021 quarter (Q4FY21) versus 21,400oz of gold produced in the March 2021 quarter (Q3FY21).
• Lower AISC: The company incurred an AISC (All-in Sustaining Costs) of $1,742/oz in Q4FY21 versus an AISC of $1,874/oz in Q3FY21.
• Debt Repayment: DCN repaid $5.2 million of debt in Q4FY21 and had an outstanding balance of $16.2 million on 30 June 2021.
• Capital Raise: DCN raised $40 million via a two-tranche placement and $3.7 million from a share purchase plan (SPP) to fast track Redcliffe project development and resume ore from the Westralia mine area in the production.
• Higher Cash & Gold Balance: DCN held $41.8 million gold and cash on hand as of 30 June 2021 (before the SPP & tranche II placement proceeds) versus $28.3 million gold and cash balance held as of 31 March 2021.

Gold Production from FY19-FY21; (Analysis by Kalkine Group)

Key Risks:

• Financial Risks: The company faces various financial risks such as liquidity, market risk, forex and interest rate changes, and commodity price changes, that could affect the financial performance.
• Exploration Risks: DCN faces mining and exploration-related risks and environmental health hazards associated with gold production and extraction.

Outlook: The company expects 100,000-110,000 oz of gold production at an AISC of $1,550-$1,700/oz in FY22. To position the company for long-term growth, DCN plans $20.4 million of exploration expenditure and $66.5 million for Doublejay pre-stripping activities, Redcliffe project development and other growth activities in FY22.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of DCN gave a negative return of 18.96% in the past month and a negative return of 31.88% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level of $0.232 - $0.565. We have valued the stock using the Price to Earnings multiple-based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium than its peer average, considering the higher cash and gold balance, debt reduction in Q4FY21, upgraded mineral resource estimate at the Redcliffe project, etc. For this purpose, we have taken peers like Resolute Mining Limited (ASX: RSG), Perseus Mining Limited (ASX: PRU), Ramelius Resources Limited (ASX: RMS) and others. Considering the current trading levels, upgraded mineral resource estimate at the Hub deposit, debt repayment, higher quarterly production of gold, reduced hedging obligations in Q4FY21, start of accelerated near mine exploration programs, valuation, and associated risks of production and gold prices, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.235, down by ~4.082%, as on 9 August 2021.

DCN Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.